The Insurance Division has developed a Frequently Asked Questions ("FAQ")
document that answers some questions about the division's implementation of
the federal Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”)
that was effective July 21, 2011. The NRRA (15 U.S.C. § 8201 et seq.)
is included in the federal Dodd-Frank Wall Street Reform and Consumer Protection
Act and affects the placement of nonadmitted insurance nationwide. The Oregon
Legislature passed House Bill 2679 in the 2011 Legislative Session to conform
Oregon law to the NRRA and makes other changes to Oregon's surplus lines law.
This bill was effective January 1, 2012.
-
Q: Is Oregon expecting tax on Oregon
home-state risks based on 100 percent of the premium to be charged at
Oregon's tax rate? Is an allocation schedule of what percentage of premium
would be allocated to which state also expected?
A: For policies with effective dates
on or after Jan. 1, 2012, we will expect tax on 100 percent of the premium
where Oregon is the home state of the policy. The tax rate is 2 percent
for premium tax and 0.3 percent for the state fire marshal tax. We are
collecting allocation data beginning now so that we can make a better
decision regarding whether to join a compact or make agreements with other
states to allocate premium taxes paid to an insured's home state.
-
Q: Does the 0.3 percent state fire
marshal tax apply to 100 percent of the Oregon premium?
A: Yes. Effective January 1, 2012,
the state fire marshal tax changed to 0.3% of 100% of the premium of a
multi-state policy.
-
Q: Does the flat Surplus Line Association
of Oregon fee amount remain unchanged regardless of the amount or percent
of Oregon premium on a policy with multi-state exposure?
A: Yes. The surplus line service
charge will be calculated on 100 percent of the premium, not just the
Oregon premium portion. When Oregon is the home state, it will remain
unchanged regardless of the amount or percent of Oregon premium on a policy
with multi-state exposure.
-
Q: On policies with multi-state
exposures where Oregon is determined to be the home state, should the
appropriate tax rate for other states be applied to the portion of premium
that represents their respective exposures and included in the payment
to Oregon?
A: For policies with an effective
date between July 21 and Dec. 31, 2011, you will pay taxes on only the
Oregon premium portion. For policies with effective dates on or after
Jan. 1, 2012, we will continue to ask for allocation data on these multi-state
policies; however, Oregon will collect tax on 100 percent of the premium
at Oregon's new tax rates (2 percent for premium tax and 0.3 percent for
the state fire marshal tax).
-
Q: Are individual members of a risk
purchasing group considered to be the same as the risk purchasing group
entity itself, and, therefore, is coverage placed for the individual members
of the risk purchasing group not subject to a required diligent search?
A: The division does not require
a diligent search letter from risk purchasing groups.
-
Q: How does the NRRA affect situations
where the risk is located entirely outside of the Unites States?
A: Location of risk is no longer
the primary determining factor for determining applicable law and tax
obligation. The determining factor is now the insured's principal place
of business or, if an individual, the individual's principal residence.
A couple of examples may be helpful for illustration purposes:
Example 1. An employer
purchases an Accidental Death & Dismemberment policy to cover employees
working outside the United States, or perhaps an Oregon resident buys
such a policy to cover themselves while outside the United States. The
coverage is only effective when the covered individual is outside the
United States and, therefore, the risk is only present outside the United
States.
In deciding this question, the Insurance
Division looks at where the purchaser/insured resides (Oregon in this
instance) and to some degree where the transaction takes place (also Oregon
in this instance). Therefore, the home state of the insured is Oregon
and tax is to be paid on 100 percent of the premium at the Oregon tax
rate.
Example 2. An employer
purchases a policy that provides medical coverage and certain trip expenses
(reimbursement for travel expense back to the United States in case of
illness) to cover employees/volunteers working outside the United States.
The coverage is only effective when the covered individual is outside
the United States and, therefore, the risk is only present outside the
United States.
Under Oregon law, health insurance is
excluded, by definition, from surplus lines insurance (see Oregon Revised
Statute 731.144). Therefore, this type of coverage would need to be acquired
under the independent procurement provisions created in Oregon Laws 2011,
chapter 660, Sections 2 and 5.
-
Q: For Oregon home state risks,
is non-United States allocated premium exempt from taxation?
A: Since the policy was determined
to be an Oregon home state risk, we will tax on 100 percent of the premium
(even though the premium contains a portion for a non-United States exposure).
